Yet another deal related to the development of an Ebola candidate surfaced as Merck (MRK) announced an exclusive worldwide license agreement with NewLink Genetics Corporation (NLNK) to research, develop, manufacture and distribute the latter’s Ebola vaccine candidate, rVSV-EBOV. NewLink’s shares slipped 2.5% following the news.
NewLink has been in the news ever since it announced that its Ebola candidate was green signalled by the FDA to enter into a phase I study.
As per the agreement, Merck will have the exclusive right to the candidate along with any other follow-on product. The Public Health Agency of Canada, which initially developed the vaccine candidate and has an exclusive licensing arrangement with a wholly owned subsidiary of NewLink, will retain the non-commercial rights.
NewLink will receive $50 million from Merck as per the agreement including a $30 million upfront payment and $20 million upon the initiation of effectiveness trials on the candidate. These trials are to start in the first quarter of 2015. Additionally, NewLink is eligible to receive tiered royalties on sales of the vaccine
The candidate is currently being evaluated in phase I studies in several countries around the world.
Meanwhile, the U.S. National Institutes of Health intends to start a large randomized, controlled phase III study in early 2015 on the Ebola candidate along with another candidate that is being developed together by the National Institute of Allergy and Infectious Diseases and GlaxoSmithKline (GSK).
Our Take
It is a smart move from Merck to enter the Ebola vaccine development race, which already has other giants like Johnson & Johnson (JNJ) and Glaxo and has no approved treatments yet. Several other companies are also developing Ebola vaccine candidates.
This year has seen the worst ever outbreak of the deadly virus. We expect investor focus to stay on companies that are working on developing Ebola therapies.
Merck is a Zacks Rank #3 (Hold) stock. NewLink is a better-ranked stock carrying a Zacks Rank #2 (Buy).
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